Centum Investment Company Plc · NSEKE:CTUM
Centum Investment — FY2011 Earnings Presentation
74 slides from Centum Investment's earnings presentation, Jun 7, 2011
Slide 1: Financial Results for the year ended 31 March 2011
Centum Investment Company Limited Financial Results for the year ended 31 March 2011 7th June 2011 1
Slide 2: Agenda
AGENDA 1. Overview 2. Financial Performance 3. Business Line Review 4. Q & A 2
Slide 3: 1. Overview
1. Overview 3
Slide 4: 1.1 Our Business
1.1 Our Business We are in the business of growing our investors wealth 14 13b Growth in 12 market 10 9b capitalization Kes Billion by 131 % 8 6b 6 4 2 - Mar. 2009 Mar. 2010 Mar. 2011 4
Slide 5: 1.2 Our Promise
1.2 Our Promise 1 BRAND • Position Centum as Africa’s foremost investment channel 2 FOCUS • Maintain focus through 3 distinct business lines 3 • Grow assets under management to Kes. 30 billion by 2014 – including GROWTH third party fund management 4 DIVERSI - • Increase geographical diversification
Slide 6: 1.3 Our Brand
1.3 Our Brand Increase geographical diversification through Pan African investments – target 50% of the portfolio to be outside Kenya by 2014 Direct Presence Indirect presence Current target areas 6
Slide 7: 1.4 Focus
1.4 Focus Organisational Structure Comments • Centum is organized in three distinct business lines; Centum Investment Private Equity, Quoted Company Private Equity and Real Kes. 15.0 Billion Estate & Infrastructure • Each business line has a specialized focus and a dedicated management team • Throug
Slide 8: 1.5 Exceptional Asset Growth
1.5 Exceptional Asset Growth 16 15b 14 12 150% growth Growth by Asset Value Kes. Billions 10 Kes. 8 Bn 9b from 2009 to date 8 6b 6 4 2 - Mar. 2009 Mar. 2010 Mar. 2011 8
Slide 9: 1.6 Current year portfolio growth
1.6 Current year portfolio growth Kes. Bn Kes m 18 3 16 0.2 (2) 4 15 14 12 9 10 67% growth 8 in portfolio 6 value 4 2 - Beg. Portfolio Additions Realised gains Unrealized gains Disposals End Portfolio 9
Slide 10: 1.7 Market beating returns
1.7 Market beating returns Centum Share Centum NAV USE Index Year price return Return NSE 20 Return Return 2006 56% 32% 8.0% 22% 2007 173% 35% 21% 5% 2008 0% -3% 5% 11% 2009 -61% -31% -40% -33% 2010 67% 56% 43% 36% 2011 38% 37% -4% 27% Share price returns include both share appreciation and dividend
Slide 11: 2. Financial Performance
2. Financial Performance 11
Slide 12: 2. Financial Performance
2. Financial Performance 2.1 Financial Results - Company Highlights 2.2 Financial Results - Group Highlights 2.43 Corporate Actions 12
Slide 13: 2. Performance
2. Performance 2.1 Financial Results - Company Highlights 2.2 Financial Results - Group Highlights 2.3. Corporate Actions 13
Slide 14: 2.1 Performance Highlights
2.1 Performance Highlights Kes. m Mar’11 Mar’10 Mar’09 Return Total Return 3,395 3,298 (2,687) • 37% growth in total return Return on Opening Equity (ROE) 37.1% 56.3% (30.6%) • Costs contained Costs below 2.5% Cost efficiency 2.0% 2.1% 2.1% • 67% growth in asset value Financial Position • 37% growth
Slide 15: 2.1.1 NAV progression
2.1.1 NAV progression 25 NAV per share 20.75 20 15.14 15 114% growth 9.69 from 2009 to 10 date 5 - Mar. 2009 Mar. 2010 Mar. 2011 15
Slide 16: 2.1.2 Net Asset Value (NAV) Progression
2.1.2 Net Asset Value (NAV) Progression Kes. m 14,000 3,122 (293) (155) 12,552 12,000 613 131 10,000 9,157 8,000 6,000 4,000 2,000 - Opening NAV Portfolio Realised gains Unrealised Portfolio costs Finance costs Closing NAV Income gains & tax 16
Slide 17: 2.1.3 Company performance - IFRS
2.1.3 Company performance - IFRS Statement of comprehensive income Statement of Financial Position Kshs. m FY2011 FY2010 Change Kshs. m FY2011 FY2010 Income 1,695 1,121 51% Assets Expenses (291) (199) 46% Total Assets 15,003 9,840 Finance costs (155) (47) -230% Capital & Liabilities Profit before ta
Slide 18: 2.1.4 Company performance per Business line
2.1.4 Company performance per Business line Kshs.m PE QPE R&I Total COMPREHENSIVE Portfolio income 554 185 5 744 STATEMENT OF INCOME Unrealised gains 1,880 221 999 3,099 Gross Return 2,434 405 1,004 3,843 Costs (166) (85) (197) (448) Total Return 2,268 320 807 3,395 Kshs.m PE QPE RE&I Total Investme
Slide 19: 2. Performance
2. Performance 2.1 Financial Results - Company Highlights 2.2 Financial Results - Group Highlights 2.3 Corporate Actions 19
Slide 20: 2.2 Group performance - IFRS
2.2 Group performance - IFRS Statement of comprehensive income Statement of financial position Kes. m FY2011 FY2010 Change Kes. m Mar ’11 Mar’10 Income 2,261 1,038 118% Assets Expenses (299) (200) -50% Portfolio value 11,966 7,709 Finance costs (155) (47) -230% Other Assets 335 547 Share of Assoc. 4
Slide 21: 2.2.1 Group performance (EPS)
2.2.1Group performance (EPS) 4.00 3.79 3.50 3.00 2.50 1.81 2.00 632% growth from 2009 1.50 1.00 0.52 0.50 - Mar. 2009 Mar. 2010 Mar. 2011 21
Slide 22: 2.2.2 Reconciling Company to Group performance
2.2.2 Reconciling Company to Group performance (Total Comprehensive Income) Kes m Company Adjustment Group Investment Income 1,685 1,685 Dividend income from Associates (354) (354) Share of Associate profits 487 487 Expenses (446) (446) Tax (2) (2) Other comprehensive income 2,158 2,158 Associate fa
Slide 23: 2.2.3 Reconciling Company to Group performance
2.2.3 Reconciling Company to Group performance (Statement of Financial Position) Kes m Company Adjustment Group Portfolio Value 14,463 14,463 Share of Associates book value 3,377 3,377 Fair Value of Associates (6,231) (6,231) Net assets 77 77 Borrowings (1,988) (1,988) Dividend receivable from Assoc
Slide 24: 2. Performance
2. Performance 2.1 Financial Results - Company Highlights 2.2 Financial Results - Group Highlights 2.3 Corporate Actions 24
Slide 25: 2.3 Corporate Actions
2.3 Corporate Actions Bonus Issue of shares • Directors recommend a 1:10 bonus issue of shares • The shareholder register will close on 22 July 2011 Cross Listing • The Directors recommend Centum’s listing by introduction on the Dar es Salaam Stock Exchange and Rwandan Stock Exchange 25
Slide 26: 3. Business Line Review
3. Business Line Review 26
Slide 27: 3. Business Line review
3. Business Line review 3.1 Overview 3.2 Real Estate & Infrastructure 3.3 Private Equity 3.4 Quoted Private Equity 27
Slide 28: 3.1 Business line & Sector Diversification
3.1 Business line & Sector Diversification Allocation by Sector Allocation by Business Line Other 12% Property Real Estate 23% Quoted 3.42 B Private Equity 23% 3.75 B 25% Alcoholic and Carbonated beverages 26% Financial Services Indusrial 25% and Allied Private Equity 14% 7.59 B 52% 28
Slide 29: 3. Business Line review
3. Business Line review 3.1 Overview 3.2 Real Estate & Infrastructure 3.3 Private Equity 3.4 Quoted Private Equity 29
Slide 30: Real Estate Business Review: Why Real Estate?
Real Estate Business Review Why Real Estate? • Seek exposure to RE • Seek well planned and asset class in the region; managed neighborhoods; BUT End- BUT Investors • Lack of: sizeable, liquid, Users • Ad-hoc, unplanned diversified (by region & developments currently by use), income dominate the mark
Slide 31: Real Estate Business Review: Why Centum?
Real Estate Business Review Why Centum? •Acquire large tracts • Attract 3rd party of land; investors willing to •Invest in master inject additional plans; capital; •Invest in physical • Able to tap into development; cheaper sources of debt capital; Long term 44 Year Track equity capital Record Publi
Slide 32: Real Estate Business Review: Our Approach
Real Estate Business Review Our Approach Investors End-Users • Create an investment grade asset that is low • Well located, well designed and well risk and generates income and capital managed developments; appreciation; • Project Sponsor as “lead developer”; • Regional diversification • Branded and
Slide 33: Real Estate Business Review: Business Model
Real Estate Business Review • Business Model Execution & Initiation Planning Project Controlling Phase Phase Closure Phase Land Acquisition: Master Plan Vision: Construction: Completion • competitive price point • zoning • infrastructure delivery • Portfolio Management • prime location • design cont
Slide 34: V&A Waterfront
V&A Waterfront 1.0 Real Estate Business Review V&A Waterfront (Cape Town, SA) 34
Slide 35: Canary Wharf
Centum Investment Company Ltd. Tel +254 20 316303 International House, Mobile +254 722 205339 5th Flr. Mama Ngina St. Fax +254 20 223223 PO Box 10518-00100 Email info@centum.co.ke Nairobi, Kenya www.centum.co.ke Canary Wharf 35
Slide 36: Rockefeller Center
Centum Investment Company Ltd. Tel +254 20 316303 International House, Mobile +254 722 205339 5th Flr. Mama Ngina St. Fax +254 20 223223 PO Box 10518-00100 Email info@centum.co.ke Nairobi, Kenya www.centum.co.ke Rockefeller 36 Center
Slide 37: Centum's Properties
Real Estate Business Review Centum’s Properties Project Company Year Acquired Description 1 Uhuru Heights Limited 1987/1988 • 0.6 acre undeveloped property located along Uhuru Highway, between Laico Regency and Utalii House; • Currently managed as a public parking facility; 2 Runda Closeburn 2010/20
Slide 38: Garuga (Uganda)
Garuga (Uganda) 38 The Site in its Regional Context
Slide 39: Uniqueness of the Garuga Site
Uniqueness of the Garuga Site 39 The Site Context
Slide 40: Illustrative Master Plan Vision – Garuga (Uganda)
Illustrative Master Plan Vision – Garuga (Uganda) Enhancing a unique place, and creating a destination by: Creating a high quality public waterfront; firstly for all Ugandans, and secondly for foreign visitors A landscape of linear parks and designed streets connecting the waterfront to Residential,
Slide 41: Site Location (Runda)
Site Location (Runda) 1.0 Real Estate Business Review 41
Slide 42: Uniqueness of Runda Site
Uniqueness of Runda Site Link Road to 1.0Waiyaki Real Estate Way Business Review Northern Bypass 1.4 Centum’s Properties – Runda (Kenya) – cont’d Limuru Road 42
Slide 43: Illustrative Master Plan Vision – Runda (Kenya)
Illustrative Master Plan Vision – Runda (Kenya) A new integrated mixed use destination featuring: A range of housing options Pedestrian friendly quality public space Environmentally sustainable A hierarchy of public to private space with nested but unobtrusive security 43
Slide 44: Development Plans – Nairobi CBD Property
Development Plans – Nairobi CBD Property 44
Slide 45: Real Estate Portfolio Review: FY 2010/2011 Highlights
Real Estate Portfolio Review FY 2010/2011 Highlights (cont’d) Kes. m 4,000 999 3,520 3,500 3,000 2,485 2,500 2,000 1,500 1,000 36 500 - Beg. Portfolio Additions Unrealized gains End Portfolio Acquisition of “Real” Assets with High Return Potential 45
Slide 46: FY 2010/2011 Highlights: Key Drivers of Unrealized Gains
Real Estate Business Review FY 2010/2011 Highlights (cont’d) Project Company Key Drivers of Unrealized Gains 1 Runda Closeburn Limited • Negotiated an attractive entry price; • Successfully completed a difficult acquisition; • Construction of Northern By-Pass complete; 2 Pearl Marina Estates Limited
Slide 47: FY 2011/2012 Business Focus
Real Estate Business Review FY 2011/2012 Business Focus Project Company Key Drivers of Future Value Growth 1 Runda Closeburn Limited • Complete the master plan vision (convert bare land into high value destination); • Satisfy conditions for change of user; • Identify and engage target market for pha
Slide 48: The V&A Waterfront, La Lucia Office Park, Nelson Mandela Square
The V&A Waterfront La Lucia Office Park The Nelson Mandela Square 48
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Slide 52: Real Estate Business Review: Investor Opportunity
Real Estate Business Review Investor Opportunity Investors Centum • Purchase Centum’s shares today: 100% Quickest and simplest Centum PropertyCo Platform Company way to gain exposure to Centum’s RE portfolio; Participate in the Pearl Marina Estates Ltd creation of world class destinations; Destina
Slide 53: 3. Business Line review
3. Business Line review 3.1 Overview 3.2 Real Estate & Infrastructure 3.3 Private Equity 3.4 Quoted Private Equity 53
Slide 54: Private Equity Portfolio Overview
Private Equity Portfolio Overview Business Overview Investment Approach • The private equity business line focuses on • Centum will focus on sectors with the acquiring controlling and significant minority following broad characteristics: positions in private companies across Sub- ― Large and growing
Slide 55: Private Equity Portfolio Overview: Investment Criteria
Private Equity Portfolio Overview Investment Criteria Portfolio Companies Local Linked to Low Import Competitive Pricing Regulatory Demand GDP Substitution Advantage Power Stability 55
Slide 56: Private Equity Portfolio Overview
Private Equity Portfolio Overview Portfolio % % PE % Total Companies Holding Portfolio Portfolio Portfolio Sector Exposure Nairobi Bottlers 27.6% 33.3% 19.5% Mt. Kenya Bottlers 27.8% 6.8% 4.0% Rift Valley Bottlers 44.0% 6.5% 3.8% Kisii Bottlers 26.4% 1.8% 1.1% KWAL Holdings 26.7% 3.3% 1.9% UAP Holdi
Slide 57: Private Equity Business Line Performance 2010 - 2011
Private Equity Business Line Performance 2010 - 2011 Consistently outperformed the market Private Equity Net NSE 20 Year Return Return Spread The Private Equity Business line out performed the NSE 2010 61% 43% 18% 20 share index by a spread of 36% in 2011 2011 31% -5% 36% Average 46% 19% 27% 57
Slide 58: Private Equity Performance Attribution By Sector
Private Equity Performance Attribution By Sector General NAS Motors 1. Nairobi Bottlers 2. Rift Valley Bottlers 1. UAP 3. Mt. Kenya Bottlers 2. Aon 4. Kisii Bottlers 3. K-Rep Bank 5. KWAL 58
Slide 59: Private Equity - Outlook of key sectors
Private Equity - Outlook of key sectors 1 • Growth achieved in 2010 to be sustained in 2011. Beverage • Key risks to come from inflation and increased competition. 2 • Better results to be derived from a diversification by product and geography. Financials • That the portfolio companies will remain
Slide 60: Private Equity Business Line Overview 2010 - 2011 Performance Review
Private Equity Business Line Overview 2010 - 2011 Performance Review Kes. m 8,000 1,882 (307) 7,572 • Increased value creation initiatives in investee 7,000 companies that saw 5,491 385 121 earnings growth in all the 6,000 companies in 2010; 5,000 4,000 • Earnings growth relative flat multiples lead
Slide 61: PE Business Line – earnings growth
PE Business Line – earnings growth Share of Centum’s profits Sectoral Allocation of earnings 57% growt h Kes 000 • Share of earnings from its private equity assets approaching the Kes 1 billion mark • Diversified source of earnings reflects the current sectoral allocation of the private equity portf
Slide 62: Private Equity valuation methodologies
Private Equity valuation methodologies Valuation basis Valuation basis proportions Valuation of Centum's PE portfolio •1 Price of a recent transaction; Net asset value, Other, 6.0% 3.5% •2 Earnings multiple; •3 Net asset value; Earnings multiple, 90.5% Total KES 7.6B 62
Slide 63: Private Equity Portfolio Valuation
Private Equity Portfolio Valuation Investment Value Fair Valuation Earnings Growth EARNINGS x COMPARABLE MULTIPLES Earn. Earn. Earn. Initial Multiple Multiple Multiple Imm. Sale Cost or NAV or NAV or NAV basis FAIR VALUATION Initial Investment Value Creation 63
Slide 64: Private Equity - Unrealized Gains
Private Equity - Unrealized Gains Attribution of value movement Weighted Average Earnings Multiple 31 March 2011 2010 2009 Due to Change in Multiples Pre-discount 10.43x 9.94x 6.94x KES 752M Post-discount 7.30x 6.96x 4.86x Total Private Equity fair value •The value-weighted earnings multiple was mov
Slide 65: Private Equity - Business Line Outlook
Private Equity - Business Line Outlook Where will value come from in 2012 1 Value creation • Continuous engagement with investee companies to sustain growth in 2011 initiatives 2 Liquidity events • We target to list and exit some of the investee companies. 3 • We are looking to make new investments
Slide 66: 3. Business Line review
3. Business Line review 3.1 Overview 3.2 Real Estate & Infrastructure 3.3 Private Equity 3.4 Quoted Private Equity 66
Slide 67: Quoted Private Equity (QPE) Strategy
Quoted Private Equity (QPE) Strategy Our business model Our investment approach • We focus on small & mid cap companies: ― With value creation opportunities • We acquire influential or controlling equity ― With limited research coverage stakes in quoted companies across Sub- ― With limited liquidity
Slide 68: Carbacid case demonstrates a proven QPE Strategy
Carbacid case demonstrates a proven QPE Strategy • Leveraged on our networks to source for the deal from the Alliance Group • Company was unlisted/suspended from 1 trading, hence, illiquid, under-researched, with growth potential SOURCING • Our PE expertise was crucial to identifying it as a suitabl
Slide 69: Delivered 14% spread above the NSE Index
Delivered 14% spread above the NSE 20 Index 20.0% 15.0% Delivery of a 10.0% positive return in 5.0% a bearish market environment 0.0% attributed to: -5.0% -10.0% Nov-10 Jan-11 Mar-11 Apr-10 Jul-10 Sep-10 Dec-10 Feb-11 May-10 Aug-10 Oct-10 Oct-10 Jun-10 1. Efficient diversification Net return NSE Ret
Slide 70: Contributed to growth in tangible shareholder wealth
Contributed to growth in tangible shareholder wealth 6,000 209 34.09 AUM grew from 5,000 Kshs3.5Bn to 1,427 1,670 Kshs3.9Bn 4,000 3,000 An important market player – 2,000 judging by the 3,487 large scale of 3,940 1,000 investment activities - Beg. Additions Portfolio Unrealized Realised gains Dispos
Slide 71: QPE 2012 Outlook
QPE 2012 Outlook To acquire influential stakes in African Stock Exchanges to fill an existing capital gap 1 Operating environment • Sub-Saharan Africa (SSA) remains as our chosen target market 2 Countries/ • African markets characterized by low liquidity Markets • Looking to fill the resultant exist
Slide 72: QPE 2012 Outlook
QPE 2012 Outlook To drive growth in investment income through bold calculated risks and new income lines 4 Equities • Equities will continue to enjoy a higher capital allocation 5 Fixed income • To gradually increase allocation to fixed income securities in hunt for a securities higher proportion of
Slide 73: Thank You
Thank You 73
Slide 74: Q&A
Q&A 74
Centum Investment Company — FY2011 Earnings Presentation on 6ix